As I’ve touched upon in recent posts, I thought it was time to review my investment portfolio.
The last time I checked it (and its allocations) was back in 2017, so here’s quite a lengthy (and rather waffly) post as it’s been a long time coming! 🙂
The large part of my portfolio is made up of index tracker ETFs. The other part is mostly investment trusts (ITs). The intention, when it comes to drawdown/early retirement, is that I will likely sell off the ETFs for capital, whilst taking dividend income from the ITs.
I would describe myself as a passive investor, my strategy is predominantly ‘buy and hold’. However, as there’s an element of investing which I enjoy, I do tinker about with a bit of active investing, small experimental portfolios and the like.
Index Tracker (ETF) Portfolio
I set up this portfolio after I’d read Tim Hale’s Smarter Investing book, combined with Monevator’s Lazy Portfolio post.
Thus, I created my own Portfolio for All Seasons, one which would supposedly weather all kinds of stock market shenanigans and which suited my own appetite for risk.
I’m thinking now that I do need to perhaps start protecting some of my wealth and increasing the bonds part of my portfolio.
A common rule of thumb is to simply hold a percentage of stocks/equities equal to 100 minus your age. If I followed this rule, that would mean having a 50/50 split equities/bonds, which to me, just doesn’t carry enough risk/opportunity for growth. Equity to bond ratio of my Portfolio of All Seasons has been 90/10, so rather on the risky/aggressive side.
Apparently some financial planners are now recommending that the rule should be closer to 110 or 120 minus your age and that is what I will initially go for – 120 minus my age so my equity/bond ratio will now aim to be 70/30.
Here’s the Old v New portfolio allocations:
So I’m reducing some of the home/UK bias and the more risky allocations.
If I end up becoming more risk averse, I may go down to 60/40 but that’s for the future.
How did I come up with these allocations? They’re just what I’m comfortable with and happy to invest in. I wanted to start implementing the changes to my portfolio asap and didn’t want inaction as a result of analysis paralysis.
Anyway, here’s how it’s looking right now:
I intend to re-balance mostly via new contributions but I have made a few sales/switches already (sold my entire holding of the global value, VHYL (Vanguard All-World High Dividend Yield ETF)). I’ll be doing more switching over the next month or so.
I may ultimately whittle these allocations down to 4 core holdings for simplification in time, not sure yet – just need to be mindful of dealing fees.
And finally, why ETFs and not funds, like Vanguard Lifestrategy? Although I still hold a couple of funds, I have mostly ETFs as the fees are cheaper for ETFs on the platforms I use.
So here are my main holdings:
Global: Vanguard All World ETF (VWRL)
Bond: Vanguard Government Bond ETF (VGOV)
UK: Vanguard FTSE 100 ETF (VUKE)
Property: iShares Developed Markets Property Yld ETF (IWDP)
Emerging Markets: iShares Emerging Markets Equity Tracker
UK Mid: Vanguard FTSE 250 ETF (VMID)
Global Small Co: SPDR MSCI World Small Cap ETF (WOSC)
Investment Trust/Share Portfolio
I wanted a part of my portfolio which I would just hold and which would generate regular income.
Originally, I had a smattering of individual shares but wanted more diversification (plus it’s really time consuming trying to research the best individual share to buy) so I started to build up a basket of investment trusts (ITs).
I chose from a mixture of ITs considered to be ‘dividend heroes’ (paying increasing dividends over many consecutive years) and diversified across global, UK and recently, more specialised sectors. There’s also a mix of growth and income ITs, although later on, I’ll likely move to more income.
This portfolio currently generates on average £130 a month, my aim is for it pay out at least £250 a month/£3k a year, which should cover the bulk of my household bills.
I guess I’ll aim to do a bit of ‘top-slicing’, ie take profits from the growth ITs and buy more of the income payiing ones in time – not sure how that will work out as I generally only buy when ITs are showing a decent discount to NAV (Net Asset Value) but occasionally, I will buy on a premium.
So whilst the capital of my ETF portfolio will be whittled down in time, I’m intending to hang onto this portfolio for a good while longer.
Why have income paying investments while I’m still accumulating?
Mainly because I need to see that I can actually generate a certain amount of income from my investments – I’d rather avoid finding out belatedly that my portfolio didn’t actually pay the income I thought it would.
Anyway, click here to see this portfolio.
I haven’t got a lot of cash in my portfolio – most of it is in premium bonds, with a tiny amount in my cash ISA. Before anyone pipes up to say how crap premium bonds are, I don’t really care, I just like the fact that they carry no risk whatsoever and that there’s a chance of winning something every month and I’ll be sure to let you know if I win a decent-sized prize! 🙂
Much in the same way that I’m increasing my bond allocations in my ETF portfolio, I will gradually increase my cash allocation although I’m not rushing on this one, with interest rates still being on the low side.
Perhaps I’ll do a bigger push later on as I’d like to FIRE with a cash buffer.
P2P and property crowdfunding – over the next few years, these should run down to zero as I’m not adding any capital to these types of investments – currently, I have less than £2k invested.
Other crowdfunding – small amounts in Freetrade and BrewDog. It’s possible that I may look at other such opportunities but these are strictly in the ‘fun’ category and not part of my retirement planning.
SIPP or ISA?
The bulk of my savings/investments are ‘tax efficient’, ie either in my SIPPs or my ISAs.
I still continue to invest in both, although I plan to build up more in my ISAs as I feel they offer more flexibility and (hopefully) will continue not to be subject to tax, future government meddling notwithstanding. I currently have more in my SIPPs but hopefully that will be addressed over the years. Note that by the time I FIRE, I will have access to my SIPPs.
My Dogs of the FTSE experimental portfolio also falls in the fun category but the dividend income I receive is reinvested into my ISA, so it benefits my overall portfolio. More on my Dogs at a later date, there’s a post pending!
I may run other little experiments or other fun portfolios although I’ll only be risking a tiny percentage of my overall wealth.
So that’s pretty much it for my portfolio for the next couple years.
I’m sure there will be many who might disagree with my strategy and wonder WTF I’m doing but I’m comfortable with it and although I wouldn’t go so far as to say I’m confident that it will do what I want it to do, well, all I can say is that I’ll do what any investor can do and that is to wait and see.
I intend to ride out any economic catastrophes, keep calm and carry on investing, which might be easier said than done!